Sweet Revenge was produced by Arif Mardin and was mostly recorded at Quadraphonic Sound Studios in Nashville. Two songs, "Blue Umbrella" and "Onomatopoeia", were recorded at Atlantic Recording Studios in New York City while "Dear Abby" was cut live at a gig at New York's State University. "Dear Abby" was attempted in the studio but, as Prine told David Fricke in 1993, "The studio version of that was cut with a band, and it was real stiff and humorless. We cut it once, live, and that was it. That was the power of the song, in the way people would turn their heads the minute I'd get to the first verse, the first chords. That was the reason we used the live version." In the liner notes to John Prine Live, Prine writes that "My Mexican Home" was partially inspired his front porch in Maywood, Illinois, while "Grandpa Was A Carpenter" was his homage to his grandfather Empson Schobie Prine. The title track quotes a line from Hunter S. Thompson's Fear and Loathing on the Campaign Trail and reflects some of Prine's frustrations with how his second album was received, commenting in the Great Days: The John Prine Anthology liner notes, "I'd quit my job at the post office, I had this album out that got incredible reviews, and then this second one where the critics started to hit me. I think it got under my skin." The album concludes with an up-tempo version of the traditional work song "Nine Pound Hammer".
Writing for Allmusic, critic Jim Smith wrote of the album "Sympathy takes a back seat to cynicism here, and while that strips the record of some depth, Prine's irreverence is consistently thrilling, making this one of his best. It's not as uniformly brilliant as the debut, but it did steer his music in a new direction — where that record is often hallmarked for its rich sensitivity, Sweet Revenge established cynicism as Prine's dominant voice once and for all. Music critic Robert Christgau wrote "Prine is described as surrealistic and/or political even though the passion of his literalness is matched only by that of his detachment: inferential leaps and tall songs do not a dreamscape make, and Prine offers neither program nor protest." In 1993, David Fricke opined that the album marks "a swing back to the expansive textures of John Prine but with a harder edge, born of Prine's own increased confidence." Steven Stolder of Amazon.com writes, "This outing isn't as musically distinctive as Prine's other albums from his early period, but as collections of songs go, it's first-rate." Tom Nolan's 1974 review of the album for Rolling Stone was positive, calling the album "a more human work, more mature, and a step forward artistically and toward a wider audience," and "his best record yet."